Government to scrap state bodies to cut costs

<p>Minister for the Cabinet Office, Paymaster General, Francis Maude arrives at the 10 Downing Street official residence of Prime Minister David Cameron in London May 12, 2010.Suzanne Plunkett</p>

LONDON (Reuters) - The government is to abolish, merge or reform 481 semi-independent state agencies to cut spending and help reduce its deficit, under a plan that will cost thousands of jobs and change the way many services are delivered.

The overhaul of what the government calls "arm's length bodies" because they are not under direct ministerial control will affect agencies with a wide variety of responsibilities ranging from competition to child protection to renewable fuels.

"It will save money, but that is not the principal objective of it, actually. The principal objective is to increase accountability," Francis Maude, the minister in charge of the reforms, told BBC radio.

The coalition had pledged in its government agreement to reduce the number and cost of arm's length bodies as part of its deficit reduction strategy.

The budget deficit stands at more than 10 percent of Gross Domestic Product and the coalition has set itself the goal of almost eliminating it in five years.

That means deep cuts in public spending, many of which will be detailed when a Comprehensive Spending Review is unveiled on October 20. Among the controversial measures already signalled are cuts to child benefits and increases in student tuition fees.

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Maude said he did not yet know how many jobs would be lost or how much money would be saved as a result of his reforms.

The opposition Labour Party said the cost of redundancy packages and benefits for agency staff who would lose their jobs and the administrative costs involved in the reforms would cancel out any gains from the proposed reforms.

MERGERS

Official documents released by Maude's ministry, the Cabinet Office, said it had reviewed 901 bodies in recent months. Of those, 481 faced substantial reform.

The documents showed that 192 of the agencies would cease to be public bodies. Their functions would either be brought back into central government, devolved to local government, handed to charities or the private sector, or scrapped altogether.

Labour unions said these changes would leave gaps in important public services.

"In many areas of the economy and social policy, (these bodies) are important in protecting the economically vulnerable, the put-upon consumer and acting as economic generators," said Tony Woodley, joint general secretary of the Unite union.

The Cabinet Office said a further 118 bodies would be merged down to 57. One high-profile example would be the merger of the competition functions of the Office of Fair Trading and the Competition Commission.

The ministry said that would strengthen the competition regime by forming a single competition and markets authority.

A further 171 arm's length bodies would be retained but substantially reformed, while 380 would be retained and 40 more were still under consideration, the Cabinet Office said.

Maude presented the sweeping reforms as more than just a cost-cutting exercise. He said they would improve transparency by bringing all state activity back under the responsibility of politicians who could be held accountable.

"What has happened in recent years is that there has been a great tendency for the government just to set up new bodies, so-called arm's length bodies, often just to avoid ministers having to make difficult decisions and defend them," he said.